Bundesbank Official Statement On Gold Repatriation

When we first heard about it, we thought Handelsblatt had gotten something very wrong. The implications were just so staggering. Turns out the news was spot on. Here is the official announcement from the Bundesbank, which roundly refutes all the spin the Frankfurt bank spoon-fed the people in October and November when it repeated time after time that there is nothing wrong with keeping German gold in NY and Paris, and on the contrary, it was better for everyone involved.

By 2020, the Bundesbank intends to store half of Germany’s gold reserves in its own vaults in Germany. The other half will remain in storage at its partner central banks in New York and London. With this new storage plan, the Bundesbank is focusing on the two primary functions of the gold reserves: to build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold trading centres abroad within a short space of time.

The following table shows the current and the envisaged future allocation of Germany’s gold reserves across the various storage locations:

31 December 2012

31 December 2020

Frankfurt am Main

31 %

50 %

New York

45 %

37 %

London

13 %

13 %

Paris

11 %

0 %

To this end, the Bundesbank is planning a phased relocation of 300 tonnes of gold from New York to Frankfurt as well as an additional 374 tonnes from Paris to Frankfurt by 2020.

The withdrawal of the reserves from the storage location in Paris reflects the change in the framework conditions since the introduction of the euro. Given that France, like Germany, also has the euro as its national currency, the Bundesbank is no longer dependent on Paris as a financial centre in which to exchange gold for an international reserve currency should the need arise. As capacity has now become available in the Bundesbank’s own vaults in Germany, the gold stocks can now be relocated from Paris to Frankfurt.

* * *

So it took the Bundesbank over 10 years to figure out that "the Bundesbank is no longer dependent on Paris as a financial centre in which to exchange gold for an international reserve currency should the need arise."

Well, as long as it has nothing to do with the recent political schism between socialist beggar France and the only country left in Europe that is not an all out parasite, all is well.

Finally, compare the above statement with the following from November:

Remarks On German Gold Reserves:

Please let me also comment on the bizarre public discussion we are currently facing in Germany on the safety of our gold deposits outside Germany – a discussion which is driven by irrational fears.

In this context, I wish to warn against voluntarily adding fuel to the general sense of uncertainty among the German public in times like these by conducting a “phantom debate” on the safety of our gold reserves.

The arguments raised are not really convincing. And I am glad that this is common sense for most Germans. Following the statement by the President of the Federal Court of Auditors in Germany, the discussion is now likely to come to an end – and it should do so before it causes harm to the excellent relationship between the Bundesbank and the US Fed.

Let’s get back to facts and figures: I would like to remind you that our gold reserves are part of the German currency reserves. These were accumulated over time thanks, in part, to Germany’s economic boom in the 1950s and 1960s. Germany’s growing economic strength, especially its strong external position, resulted in rather large trade account surpluses, most of them acquired in US dollars. At that time, the International Monetary System, known as the Bretton Woods System, was dominated by the US currency. As long as this system was in force, which was up until 1971, the US Fed was obliged to exchange its currency for gold.

Any current account surplus thus resulted in an increase in Germany’s gold reserves. This gold was stored in US vaults for obvious reasons [ZH: sorry, we don't have an econ PhD: what are the "obvious reasons"?]. This was not only the case for the gold hold by the Bundesbank – it was, in fact, common practice. By the way: it was the only practical thing to do, since running a trade account deficit meant a decrease in gold stocks.

Thus, we are now looking back at sixty years not only of fruitful cooperation in many fields and international fora, but also of storing gold and trading via the New York Fed. As a matter of fact, it is sensible for us to do so in New York, as Frankfurt is not a gold trading venue.

Throughout these sixty years, we have never encountered the slightest problem, let alone had any doubts concerning the credibility of the Fed [ZH may, and likely will, soon provide a few historical facts which will cast some serious doubts on this claim. Very serious doubts]. And for this, Bill, I would like to thank you personally. I am also grateful for your uncomplicated cooperation in so many matters. The Bundesbank will remain the Fed’s trusted partner in future, and we will continue to take advantage of the Fed’s services by storing some of our currency reserves as gold in New York.

At the same time, you can be assured that we are confident that our gold is in safe hands with you. The days in which Hollywood Germans such as Gerd Fröbe, better known as Goldfinger, and East German terrorist Simon Gruber, masterminded gold heists in US vaults are long gone. Nobody can seriously imagine scenarios like these, which are reminiscent of a James Bond movie with Goldfinger playing the role of a US Fed accounting clerk.

While gold is important, we have to combat a crisis of confidence in the euro area. This is the task we need to concentrate on. And we will do so.

Until we don't, three months later, and decide to repatriate said gold after all...

The statement makes sense. UK not part of Euro and US still reserve currency. What it also tells me is that if the US dollar even is in jeapordy of not being the reserve currency, Germany will take back that gold as well. London is close enough that when push comes to shove they could just go over there and get it if need be.

side note: the obvious reason to leave the money in US when on gold standard based on trade surpluses is that every time the time came to match the gold hold with the trade surpluses, why would you want gold being shipped back and forth at incremental intervals. The Fed Rreservce could easily move the gold within the vaults without shipping back and forth.

"The days in which Hollywood Germans such as Gerd Fröbe, better known as Goldfinger, and East German terrorist Simon Gruber, masterminded gold heists in US vaults are long gone."

Seriously? There was ever a time that Diehard 3 was an actual fear? They are fictional characters motherfuckers. Don't insult everyone's intelligence, we all know who the real bad guys are. The shit is turning into farce.

Gold was their SHTF currency to hedge against currencies other than the Euro. Once France had the Euro, holding SHTF currency in France provided no diversification. Gold held in France can only be converted back to Euro since all gold in central banks is paper gold and must be settled in fiat.

Central bank gold is always traded for fiat because it's like Comex. Settlement is in fiat when the metal can not be located. Like Comex, there are multiple contracts against each ficticious lump of metal. Reserve ratio, bitchez!

I don't think this will be good enough for the electorate in Germany. They don't trust our Fed, and who can blame them. This is going to be a continual slide towards 100% by 2014 as public outrage grows. Each new press release will make it look worse. Then again, maybe the Fed privately told Buba no dice on the gold. The gold swaps must be a real mess for them to try and unwind, if they are able to at all. It sure would be interesting to know exactly how that phone call went between Buba and the Fed, I imagine there were some spincter clenching moments on each end of that conversation.

"Well, as long as it has nothing to do with the recent political schism between socialist beggar France and the only country left in Europe that is not an all out parasite, all is well."

I'd see it differently : Merkel knows the French have properly stored her gold for all these years and they can deliver the yellow stuff ovenight without a hike...

As for the Yanks... Merkel knows it's better ask them to cough out the yellow stuff progessively and give them enough time to gather 1 barre here 1 barre there. Otherwise Fort Knox is going to shut down you know...

It helps to read the article before you comment on it. Germany plans to move actual Gold bars/ingots from France and the US to its vaults in Germany (If there's any left and hopefully isn't mostly Tungsten).

There is a total disconnect between the headline and the reality .... if it takes 8 years to repatriate 19% (19%/8 = 2.375% per year) .... it will take 21 years (50%/2.375% = 21.05 years) to repatriate the remaining 50% ? 29 years of repatriation .... payable to the bearer on demand ?

I fail to see how anyone could consider anything as valuable as gold bars safe in NYC, even supposedly deep underground in vaults. How many people do you think are spending 24/7 trying to figure a way into those vaults? Has to be in the thousands. Sooner or later - voila.

Or, a few clever banksters ( there are at least a few) have already figured out how to liberate all that gold, and already done it, and the whole point is moot.

Oct 22, 2012 – In an 'audit-the-fed' style effort, the court wants to ensure that the nearly ... The Bank of England, The Bank of France, and the US Federal Reserve. ... has demanded that the Bundesbank undertake an audit of its gold reserves.

The report also noted that the Federal Reserve Bank of New York refuses to allow the gold's owners to view their own reserves.

"Well Fritz...the truth is that we kinda 'borrowed' it and the damn Chinese cheated and wanted their paper turned into real gold bars. They weren't buying that cash settlement bullshit we usually get away with because they got us by the balls and they're squeezin hard.

Yeah, well the funny part is WE don't have any gold of our own anymore, so we'll have to dig some up for you. Keep that on the low down, right?

"Gold has no value. I don't know who told it's money, but, boy, are they stupid!"

"It's perfectly safe in NYC. It will be expensive to tranport, you'll have to update your vaults, think of all the bother."

"Why waste your time"?

Seriously, this changes everything. The little game of trying to keep gold out of the monetary system is over. Of course, it always has been part of the system, but they actually had the general public bamboozled. We really thought it was a barbaric relic.

What scares CB jocky's about gold is not the signal it sends, but the fact that its price can rise to any level without screwing up the economy. Since we don't use it for anything, no indsutry gets shut down if the price goes way up. What this means is people can decide they'd rather have gold than dollars (pick your fiat), and gold can rise in price to consume ALL the dollars, thereby becoming a repudiation of the currecy in fact. This is much easier than everybody trading dollars for houses, for example.

But all those dollars are still stting somewhere, in somebody's account, going nowhere. This is the express lane to hyperinflation.

Much of the worlds gold is being delivered to vaults in Israel. That's why an invasion of Israel will commence when enough countries are aware of this. A major invading force will be the Russians. Obviously, I haven't figured out a lot of the details yet, but when I do, I will announce it on ZH first.

The Bundesbank has no problem(s) with the credibility of the New York Fed? WTF? Deutschland, we need to have a talk. I'm just a regular ol' citoyen, but, for me, there is no end to the problem with New York Fed credibility.

I am going to repeat myself: The repatriation of gold is necessary to have the threat of currency reform on the horizon be credible. The Irish and Italians lately believe that the balance of power in the Euro zone has swung in their favor.

(Translation mine)"The really important aspect of the exit threat of Italy and Ireland is, to me, a different one anyway: Obviously more and more people believe that one can successfully coerce the Euro zone -and in particular Germany- to making transfer payments. It is being assumed that Germany will suffer the greatest damage [in the case of a collapse - FGWL]. This assumption is the consequence of the failed rescue policy. For the rescue policy is based on the irreversibility of both the Euro zone as well as the Euro itself."http://www.insm-oekonomenblog.de/9697-erpressung-und-austritt/

Contrary to some claims, this not about trust between central banks or anything like that. The dollar value of the gold is minor in terms of the broad financial relationship. If the BBK sold $20 bln worth of Treasuries, there would not be so much ink spilled on the issue. The fact that the move is not taking place imminently also tells you that there is no urgency here. There issue emerged in Germany and was a distraction. Germany's gold holdings are a small fraction of its wealth. Depsite the best efforts to make this into a major issue of international trust and fiat currencies (who doesn't have a fiat currency?), it is hardly even a minor event in terms of magnitude and implications. It is a non-story, "inside baseball". It does not impact the price of gold. It does not reflect the US-German or the German-French relationship. There are vastly more important issues. No more plantinum coin farce The fact 27 bln euros of German gold that will be eventually brought back to Germany will be but a small footnote in the history of the barbaric relic.

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